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Sunday, June 16, 2024 | Back issues
Courthouse News Service Courthouse News Service

Potato Cartel Settles for $25 Million

BOISE, Idaho (CN) - A federal judge approved a $25 million settlement that completes one chapter of a five-year long antitrust battle over the nation's potato market.

Consumers will get $5.5 million and grocers $19.5 million. Chief U.S. District Judge B. Lynn Winmill granted final approval of the settlement on Monday.

Jamestown, N.Y.-based potato buyer Brigiotta's Farmland Produce and Garden Center filed the class action against the United Potato Growers of America (UPGA), United Potato Growers of Idaho (UPGI) and a long list of member and nonmember growers in 2010.

The lawsuit, and another filed by Associated Wholesale Grocers in 2013, claims the defendants conspired to inflate the price of potatoes "in classic cartel behavior," that the cartel used physical and nonphysical intimidation to get independent growers to join, that it used high-tech methods of surveillance and physical "flyovers" to monitor members, and that the successful campaign led to an 80 percent control of the market.

Idaho grower Albert Wada, of Wada Farms Group, allegedly spearheaded the campaign, founding the United Fresh Potato Growers of Idaho in 2004, later renaming it the United Potato Growers of Idaho.

The organization's purpose, as stated in its articles of incorporation, is to "stabilize potato prices and supplies in the state of Idaho and to work with similar cooperatives in other states having similar purposes," according to the third amended complaint, a 107-page monster filed on Jan. 24, 2014.

United Potato Growers of America was founded in 2005 and is headquartered in Salt Lake City.

Members pay dues from $10,000 to $500,000 based on acreage, according to the complaint.

The "cooperatives" were formed in response to declining prices. Growers reduced the supply of potatoes, in part, by changing their contracts with customers, basing orders on a specific number of acres of potatoes to be grown instead of a specific quantity of potatoes.

"This type of contract eliminated diversion between markets for potatoes by growers and reduced the likelihood that the market for fresh potatoes would be flooded and potato prices would be depressed," according to the complaint. "Prior to this change, growers under contract to sell process potatoes had an incentive to plan reduction so as to provide a safety margin over contract amounts, and then sell or dump the surplus in the fresh potato market, depressing and destabilizing prices for fresh potatoes."

Idaho produced 11 billion pounds of potatoes in 2010, down from roughly 13 billion pounds in 2009, according to the U.S. Department of Agriculture field office in Boise.

"They had record levels of yields in 2009," a USDA spokesman said. "The acreage was higher. In 2010, acreage dropped by 25,000 acres. So even if you had the same yield, you'd still have less total production."

Weather conditions were also cited as a reason for the drop in acreage.

The UPGA has allegedly been working with Mexico, Canada, the United Kingdom and countries in the European Union.

The potato cartel litigation has grown into a massive lawsuit involving nearly 100 law firms around the country.

And it's not over. Associated Wholesale Grocers said in June that it will not participate in the settlement and will pursue separate legal action.

"AWG's individual action alleges that the defendants engaged in various supply-control and price-fixing practices designed to raise the price of fresh and processed potatoes in violation of the Kansas Restraint of Trade Act and the Sherman Act," the group said in a statement. "AWG's case continues pretrial proceedings in the District of Idaho before being returned to federal court in Kansas for trial."

United Potato Growers of America CEO Jerry Wright told Courthouse News: "There are still a couple of plaintiffs, Associated Wholesale Grocers and, I think, Winn-Dixie that still haven't settled. We still have to go through procedures until, and if, they settle. The case is not done with those plaintiffs."

Wright said he was not at liberty to discuss where the $25 million in settlement money will come from. Asked if consumers would see any results from the lawsuit in the checkout lines, he said: "The price of potatoes is set by supply and demand."

Though restricted by the settlement for the next seven years, Wright said the UPGA and UPGI are not going away.

"The co-ops still exist and are supported nationally and are still very much engaged on a national scale with potato growers," he said.

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